Canary Wharf dives into the red

TAKEOVER target Canary Wharf has seen £1.2bn wiped off the value of its property portfolio and swung into the red for the first time in four years.

And the Docklands developer, being stalked by two suitors, did not have news of any formal offers as it unveiled results for the year to 30 June.

Chief executive George Iacobescu, expected to continue in an executive role under any future new owner, refused to be drawn into a time limit for announcing a bid. 'It will take as long as it takes to get the best proposal for shareholders,' he said, although an announcement is expected within a couple of weeks.

Canary Wharf's asset value per share, a key indicator of the underlying worth of a property company, fell to 344p from 510p a year ago and 370p at the end of December, below market expectations.

This was after the market value of its properties under construction, and those held for development, dropped to £1.58bn from £2.3bn last year.

Much of that fall comes from around 390,000 square feet of unlet space, out of 600,000 square feet, at 40 Bank Street, one of its newest Docklands towers.

The net realisable value of the portfolio, or what it could be worth in the future assuming everything is completed, fell to 2.3bn from £3.49bn last year.

The company founded and chaired by Paul Reichmann turned in £13.2m of pre-tax losses before exceptionals against a £22.6m profit last time. Last year's post-exceptionals profit of £203m was skewed by the disposal of the One Canada Square skyscraper to HSBC.

Iacobescu and finance director Peter Anderson were cheered by the 26.9% rise in operational profits to £165.2m on the back of a 21% rise in rental income to £250m.

Anderson said the move into a loss at the pre-tax level was a function of the 'lag' between having to pay interest on the company's debt ahead of its rental stream landing in its accounts. 'This will balance out in due course - it's a function of our capital structure.'

Canary Wharf's independent directors are expected shortly to recommend an imminent takeover offer from either a banking consortium of Morgan Stanley and Goldman Sachs or Brascan, the Canadian power company. An offer of between 290p and 300p per share is expected, which would value the company at £1.7bn. The shares ended unchanged at 275p.

Two new lettings today took the total of new lets to 440,000 square feet since the end of the last financial year in June. BP and Reuters were the biggest new tenants.